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Dialogue Health Technologies Inc.

(CARE-T) C$15.27

Q1/F21 First Take - Off to a Solid Start

Event

Yesterday after the close, Dialogue reported its Q1/F21 results. Conference Call: 10:00 a.m. ET (register here).
Impact: NEUTRAL

Q1 revenue beats expectations, but increased spending hits Adj. EBITDA.

Dialogue reported Q1 revenue of $15.2mm, modestly above our estimate of $14.3mm and consensus of $14.5mm. Adj. EBITDA of ($5.0mm), was right in line with our estimate of ($5.0mm) but slightly below consensus of ($4.6mm).

• Revenue grew 321% y/y (~174% y/y organically) and 13% q/q, aided by strong growth in PMPM members, an increased attach rate, and the Optima Health acquisition. The revenue beat was driven by the primary care and mental health business, which generated revenue of $9.2mm (up 167% y/y). EAP revenue was $5.3mm (up 7% q/q) and OHS revenue was $0.7mm (up 305% y/y).

• Annual Recurring and Reoccurring revenue grew 219% y/y and 12% q/q to $65.3mm. Its monthly net retention rate was 102%, flat q/q and up from 101% last year.

• The number of PMPM members grew to ~1.27mm, up from ~200k last year and ~933k last quarter. New customer wins included a major telco, two top 30 law firms, and a brand name consumer retailer.

• Despite the surge in members, the attach rate still grew to 1.08 from 1.07 last quarter and 1.06 last year, highlighting its solid progress in cross-selling its EAP and mental health offering to its primary care customers.

• One customer represented ~15.7% of revenue (~$2.4mm; we believe Sun Life), while another accounted for ~11.1% (~$1.7mm; we believe Canada Life).

• Gross margins were 41.5%, down from 43.7% last year (partly due to the Optima acquisition) but up from 34.8% last quarter, and above our forecast of 37.4%.

• OpEx was $12.1mm, above our forecast of $10.9mm, primarily due to higher- than-expected G&A expenses.

• EPS was ($3.55); however, adjusting for an ~$225.5mm non-cash accounting charge related to the increase in the fair market value of its Class B preferred shares that were converted in the IPO, it was ($0.08).

• FCF was ($4.5mm) and Dialogue ended Q1 with $129mm in cash ($127mm in net cash), bolstered by the completion of its $100mm IPO at quarter-end.